Immigration minister Michael O'Brien condemned the "corrupt and incompetent" conduct of advisers who were "making passports available to people as they walked through the door", adding that the Government would introduce regulation shortly.
He stressed during question time that the forthcoming Immigration and Asylum Bill aimed to speed up decisions on claims for political asylum and to deter economic refugees from seeking to enter Britain.
Mr O'Brien said that, 584 foreigners seeking entry into the United Kingdom had been picked up at ports and airports by the Immigration Service in fraudulent possession of British passports between 1 October 1997, and 30 September 1998.
He insisted there would be no amnesty for people who had been refused asylum and challenged the Tories: "You left tens of thousands of asylum seekers - some of them genuine - in a backlog for six, seven, eight to ten years without a decision in their cases."
David Winnick, Labour MP for Walsall North, said many vulnerable asylum- seekers who had paid a high price for dubious advice from immigration advisers ended up in MPs' surgeries asking for help. "Isn't it about time that all this sort of racketeering... is cleaned up?" he demanded.
Mr O'Brien said the Government was committed to taking action "as soon as possible". "The whole way that these rackets have been run is a scandal... I would say to MPs that they consider very carefully before they decide to support an application by someone who has just written to them."
The number of asylum applications awaiting an initial decision at the end of October this year was 59,000. At the end of December 1995, the figure was 70,000; in 1996 it was 57,000; and in 1997, 52,000.